Montrose Chemical Corp. v. American Motorists Insurance

The law firm of Latham & Watkins (La-tham & Watkins), on behalf of its client, Montrose Chemical Corporation of California (Montrose), brought seven causes of action against The Travelers Indemnity Company (Travelers), American Motorists Insurance Company (AMICO), and Insurance Company of North America (INA). In its complaints, Montrose alleged that Travelers, AMICO, and INA had in bad faith failed to defend Montrose against seven underlying environmental damages claims. The district court dismissed Montrose’s claims for lack of subject matter jurisdiction. Travelers then brought a motion, pursuant to Federal Rule of Civil Procedure 11(c)(1)(A), seeking sanctions against Montrose. The district court granted Travelers’s motion and sanctioned Latham & Watkins. Montrose Chem. Corp. v. American Motorists Ins. Co., 926 F.Supp. 944, 947 (C.D.Cal.1995). Latham & Watkins appeals the district court’s imposition of sanctions. We reverse.

I.

Montrose is a Delaware corporation that used to manufacture, among other chemicals, the pesticide DDT. Montrose’s manufacturing operations were conducted primarily in California and Nevada. Although Montrose still owns a chemical facility in Nevada…